It’s the right thing to do, and many financial planners recommend buying long-term care insurance to cover the high cost of nursing home care you may need later in life.
However, some say huge rate increases for the insurance is turning the product into an insurance nightmare.
It's all over the news these days; the cost of long-term care insurance is on the rise, stinging millions who bought the insurance to protect their assets from the high cost of nursing homes.
“You're trying to protect yourself from the risk of running out of money,” said Alex Gillette.
Gillette bought a long-term care policy 5 years ago.
The 72-year-old retiree paid $6,000 a year when he purchased the policy. Now, that same policy costs Gillette $10,000 dollars a year.
“It’s a very significant amount of money,” he said.
“Every year you invest 4 or 5 thousand dollars in the policy and if the rate goes up that increases,” said Gillette.
Rates have been rising dramatically over the past few years in Pennsylvania. Just in the last year, there have been over 33 rate increases.
Some rate requests are as high as 90 % the average increase is 20 %.
Why so many increases?
Basically the insurance companies mispriced the policies and they are unprofitable, so they need the increases to stay solvent.
“No person would ever be able to say, well, I’ve made some bad choices in my investments, so therefore I should be allowed to pay less for insurance,” Director of Consumer Affairs in Philadelphia Lance Haver said.
Haver has filed objections to the rate increases, seeking explanations for the large increases for policyholders.
So Fox 29 went to Harrisburg to ask the Insurance Commissioner about the rate hikes.
“We know the consumers are frustrated and that has been a message we've conveyed to the insurance companies,” said Pa. Commissioner of Insurance,Michael Consedine. “There's a lot we need to figure out how we can try and price this product more appropriately.”
That's what Gillette wants. He says the frequent and significant rate increases concern him, and he worries he could lose everything he's worked for.
“The risk is that instead of paying $10,000 a year you're paying $150,000 a year or $200,000 for long-term care,” he said. “Your estate doesn't' last very long when it's being nicked at 2 or 300 thousand dollars a year for long-term care
Consedine says Pennsylvania has been working with the insurance companies to address the crisis and he says the companies are getting the message.
“At some point you either have to figure this product out and price it accordingly or you need to stop coming back for these rate increases,” said Consedine.
Gillette can only hope he can afford to keep his long-term care policy.
“I’m kinda looking on the optimistic side that I’ll just when the end comes rather than linger around,” said Gillette.